McDonald's turnaround gains more ground

OAK BROOK, Ill. – McDonald’s Corp. sustained the momentum generated by its transition to all-day breakfast and turned in another strong financial performance.

First quarter comparable sales in the United States advanced 5.4 percent on the strength of all-day breakfast and the company’s McPick 2 value menu. Global comparable sales climbed 6.2 percent, benefiting from the leap year.

Steve Easterbrook, president and CEO, McDonald's Corp.

“McDonald’s brand and business is built on offering delicious food and beverages through unmatched convenience and compelling value,” Steve Easterbrook, president and CEO said in a statement. “The turnaround plan we announced last year is grounded in enhancing these critical customer-driven elements, and I’m pleased to report that our turnaround is taking hold. The ongoing investments we’re making in running great restaurants and delivering what matters most to our customers are beginning to yield sustained positive results. For the quarter, we generated higher sales, revenues and operating income in constant currencies across all business segments.”

For the first quarter ended March 31, McDonald’s reported net income of $1.098 billion, or 1.23 per diluted share, compared to $811.5 million, or 84 cents per diluted share, reported in the year-ago quarter.

Total revenues for the quarter declined to $5.90 billion from $5.96 billion in March 2015.

McDonald’s continues to adjust the price of its value offerings.

“While there is still work to be done, we are on the right path to make even greater progress,” Easterbrook said. “I am confident that our continued efforts will deliver meaningful long-term value for all stakeholders into the future.”

Operating income in the US rose 15 percent on higher sales-driven franchised margins and higher gains from restaurant refranchising. “Looking ahead, the US business remains focused on finalizing its long-term value platform, investing in core menu enhancements and simplifying restaurant operations to deliver an outstanding customer experience,” the company said.

In the International segment, comparable sales advanced 5.2 percent for the quarter, driven by strong performance in the United Kingdom, Australia and Canada. First quarter operating income increased 12 percent (18 percent in constant currencies), on higher franchised margin dollars. The segment delivered strong results despite ongoing economic and competitive headwinds in France and Germany, the company said.

The company’s High Growth segment reported a 3.6 percent increase in comparable sales, led by strong comparable sales performance in China and positive performances across other markets, including Russia, McDonald’s said. Additionally, sales recovery in Japan produced an 11 percent increase in comparable sales in the company’s Foundational markets.

“Quarterly operating income increases for both segments reflected comparison against the prior year’s strategic charges and recovery from the prior year’s impact of the 2014 supplier issue — both of which negatively impacted China and Japan’s results in first quarter 2015,” the company said.

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